A California penny stock trader has been charged with fraud by the Securities and Exchange Commission in part for telling investors the company they were investing in had developed an “approved” blood test for Covid-19, the SEC announced Wednesday.
James C. Nielsen of Santa Cruz, Calif., conducted a fraudulent pump-and-dump scheme involving Arrayit Corporation, a biotechnology company, by making hundreds of misleading statements in an online investment forum, including the Covid-19 claim, the SEC said. Nielsen told investors that Arrayit had an Emergency Use Authorization application for the Covid-19 test pending with the U.S. Food and Drug Administration, and, at the same time, that Arrayit already had received FDA approval for its Covid-19 test, the complaint said.
According to the SEC's complaint, beginning around March 2, 2020, Nielsen attempted to drive the stock price of Arrayit securities higher using online posts without telling them about his large position in Arrayit stock or his plans to sell the shares while others were buying.
Nielsen also allegedly created the false impression of high demand for Arrayit stock by placing and subsequently canceling several large orders to purchase shares in a tactic known as "spoofing," the complaint said. Nielsen made approximately $137,000 in six weeks, the SEC said. The SEC temporarily suspended trading in Arrayit securities on April 13 before Nielsen was able to profit further from the scheme, the complaint said.